Economy

GM Death Spiral Continues

Current Events, Economy / By / March 10, 2023

The largest automaker in the US continues it’s death spiral. And it really is sad to watch. An internal memo which leaked recently states that GM is desperate to reduce “structural costs” and is looking to jettison a large portion of it’s salaried US workforce. Reports suggest GM wants to “right-size” as many as 50% of current employees. Which is a curious move at a time when vehicle structures are changing at an unprecedented pace and the vehicle market is evolving rapidly Decimating your ability to innovate and develop new products seems counterproductive at a time like this, to say the least. But General Motors doesn’t really have much of a choice given it’s financial state. The sad truth is…. GM doesn’t have too many workers to be competitive. It has too many retirees. By promising lavish pension plans to previous generations of workers, GM burdened itself with a huge fixed cost for many years to come. It made sense when GM was a gigantic corporation with massive amounts of revenue and all of it’s competitors were in the same boat. Back then, GM’s pension costs could be spread across many millions of vehicles. Today, that is not the case. GM’s share of the US market has been reduced from ~50% to only 17%. Foreign competitors without GM’s huge fixed retirement costs have already chased them out of the car market. GM stopped making passenger cars well before the big EV push. They couldn’t make any money on them. The only vehicles GM could still sell and turn a profit on were big heavily-optioned SUVs where the extra cost baked into GM vehicles isn’t such a large percentage of the selling price. GM seems to be counting on Federal subsidies and regulations to make them viable in the new electric vehicle space. Without the Feds propping them up going forward, it is hard it come up with a business model where GM remains viable.

GM has already been bailed out once by the Federal government. And Barak Obama and the Democrats made sure GM’s unionized retirees did not have to share in the restructuring pain. But with GM continuing to wither and shrink, the next big crisis seems inevitable. There is little GM can do any more to avoid it. The decisions that are sinking one of the largest corporations ever to exist were made decades ago. General Motors should serve as a cautionary tale. Don’t assume your current business model can last forever. And, that which cannot continue on… won’t.

Why a Housing Crash is All But Guaranteed

2 Comments / Economy, Housing / By / November 2, 2022

Real estate prices have exploded over the last several years in the US. While it has been great news for homeowners, the party is about to come crashing to a halt. Markets are all about supply and demand. And, with low interest rates and a booming economy under Donald Trump combined with too few homes, the demand for housing has been very high in recent years. The supply side isn’t likely to change any time soon. But demand is about to crater. Thanks to Joe Biden and the Democrats, we are just entering the leading edge of what will almost certainly be a deep and painful recession. Combined with crippling inflation, the spending power of American consumers is in a nosedive. On top of that, the Federal Reserve has been steadily ratcheting up the interest rates to try and combat the inflationary inferno consuming the economy. 30-year fixed interest rates are currently hovering around 7%. How big of a deal is that?

Let’s look at an example. Suppose you are looking to take out a $264,000 mortgage. A couple of years ago, a rate of 2.625% would have been typical, and your monthly principal and interest payment would have been $1060.36. However, at a 7.0% interest rate, your monthly P&I on the same loan comes out to $1756.40. In other words, your payment today would be an extra $696.04/month, or 65.6% higher than it was just a few months ago for a house of the same price. That is a catastrophic increase. Couple that with a tanking economy, and the pool of potential homebuyers is decimated. Sellers will be forced to slash prices if they want to make a sale.

The high interest rates have an extra insidious effect. Because the borrower is paying so much in interest, the principal they owe on their loan goes down much more slowly. Using the previous example, if the homeowner decides to move after 16 years, at 2.625% he will have paid a total of $203,588.62 to the bank with an outstanding balance of $148,938.98. At a 7.0% interest rate, the borrower would have made payments totaling $337,228.53 and still have $187,769.68 of unpaid principal. So despite paying an extra $133,639.91 to the bank, at 7.0% the borrower would have $38,830.70 less equity in their home after 16 years.

7.0% mortgage rates are a dumpster fire. With inflation still roaring, they are likely to climb still higher. Couple that with inflated housing prices and a shitty economy, and there is no way a crash can be avoided.

Housing Crash Looming?

Biden, Economy, Housing / By / August 2, 2022

Anybody really surprised by this?

Thanks, Biden!

With the Democrats printing and blowing money like a crack whore with a stolen credit card at a time when inflation was already starting to climb, a housing crash is a near certainty. Despite the US having a housing shortage. Prices are still historically high. But nothing is selling right now. Interest rates have already doubled over what they were 18 months ago, significantly reducing what buyers are able to pay for a home. And with the “recession by any other name” getting ready to kick into high gear, it won’t take long for some of these home sellers to start to get desperate and dump their properties on the cheap. The next shoe in President Pants Load’s “green transition” is about to drop.

US Economy Refuses to Self-Identify as a Recession

Economy, Politics / By / July 26, 2022

Progressives have intentionally un-defined the term “woman.” They reject the meaning that the word has had for literally centuries… a human adult female. But they can’t think up of a replacement definition that doesn’t contradict their non-sensical gender ideology. So they essentially un-defined word “woman.” To the left, any person who identifies as a woman, is one. A woman is a person who identifies as a woman. And since the left’s definition of a woman is just circular logic – defining a word using only that same word – anybody can be a woman at any time… or not. You can become a woman. You can cease to be a woman. Only individuals can tell you if they are a woman or not. And they are never wrong…. Every living person knows definitively whether they are a woman or not. Despite the word having no meaning. Or more accurately, because the word no longer has any meaning. At least according to the progressives.

These stupid word games are a hallmark of the left. Their ideas and policies are not at all popular, so they continually try to rebrand them and conflate them with things that are popular. The term “liberal” actually used to mean a good thing. Until it was coopted to mean “leftist.” And “tolerance” used to mean live-and-let-live. Now it means fully embrace the leftist hegemony or be branded a racist/sexist/nativist/take-your-pick-slur and targeted for cancelation.

It depends on what your definition of the word “is” is.

– Bill Clinton… former POTUS and lecherous creep

Now the Democrats want to do the same thing with the term “Recession.” It is widely expected that the official GDP numbers to be released next week will show that the economy contracted last quarter. That will be two straight quarters of negative economic growth. Two straight quarters of contraction has been the historical definition of a recession. One quarter might be explained away as just a blip. But two quarters in a row, i.e. 6 whole months, is a pretty good indication your economic output is falling. Your economy is not growing. Just the opposite. It is receding. Thus, the term “recession.” Pretty simple.

The Democrats don’t like this. Especially 3 months before an election. Everybody knows a recession is bad. And everybody will know who to blame if we are in one. It’s far too late for the Democrats to reverse their disastrous policy choices that have imploded our economy… not that they would anyways. Jobs and standard of living are of minor importance compared to climate change and social justice to the Democrats. But they really don’t want to accept the blame for the hardship their policies have created.

The Democrats answer to this conundrum seems to be to redefine what a “recession” is. It is no longer just about whether your economy is growing or shrinking. Now it also involves a bunch of other “holistic” factors. Factors that Democrats would rather focus on instead of whether you can feed your family or not. And these factors are far too complex and nuanced to articulate. Only the experts in the Federal Government can determine whether we are in a recession or not. And by golly they have already pre-determined we are not! In fact, everything is going just super. Why do you ask?

It remains to be seen whether the left’s latest half-ass gaslighting attempt will work. Most people I come across seem to be acutely aware that things are not going well in our country. We shall see in November.

Captain Obvious Weighs In on Gas Prices

Biden, Economy / By / June 14, 2022

The New York Post ran a story today revealing the big secret that soaring gas prices are part of the Democrats’ plan to force Americans to switch to the Green Energy types they prefer. I think we can safely file this one under “No shit, Sherlock.” Recent polling shows that at least 1/2 of America was partially awake during the 2020 election when Biden repeatedly promised to nuke the oil industry.

Eliminating oil plays well with the Democrat base and the global left. President Pants Load probably thought he would be hailed as a great hero by pushing America to the forefront of the switch away from fossil fuels. And the global left undoubtedly will praise him. They always do when America shoots itself in the foot, especially when it is to gain their approval. Average Americans, not so much.

Last year a feeble-minded jackass with delusions of greatness carelessly sabotaged the US oil industry confident the economy could run on windmills and unicorn farts. Then an insurrectionist reality intervened.

I’ve mentioned before that progressives basically live in a fantasy world, where all good things are possible if you want them badly enough and just believe. The problem for President Crap Stain is the technology and infrastructure are no where near ready for a switch to electric. The cars are expensive and impractical. The charging infrastructure is woefully inadequate. Our electrical grid isn’t up to handling the extra load. And our capacity to generate all that extra electrical power doesn’t exist. In short, forcing an immediate switch is a recipe for disaster. But Biden and his leftist string-pullers don’t want to hear about it. They want the credit for bringing about transformative change so they can go down in history as “great” men. They are too arrogant to wait and let the transition happen organically. They need to have their name on it because they crave the adulation. And they are too stupid to understand the systems they are disrupting, and the consequences that could follow by ignorantly disrupting them. And if they do, they just don’t care. So they push ahead anyways despite the facts on the ground.

And predictably, it has exploded in their faces. Democrats wanted gas prices to soar. But they didn’t want them to soar quite so fast. And they certainly didn’t want to be blamed for it. I 100% believe they thought electric cars would sweep right in to replace gasoline vehicles with minimal hardship. They thought they would be the big heroes who ushered in the wonderful new high-tech world of electric vehicles and climate sustainability and everyone would love them for it. Not the morons who devastated the US economy and drove the country off a cliff.

And because they are unserious, they didn’t realize the oil industry can’t just flip a switch and dramatically increase production overnight. It takes investors. It takes planning. It takes personnel. It takes infrastructure. All of which this administration has been been doing everything within it’s power to crush since day one. Now when their delusions of electrified grandeur are failing faster than Joe’s Depends and the population is ready to break out the torches and pitch forks, they are dismayed that another fantasy-world solution isn’t there to save them. Thank goodness the “adults” are back in charge, right?

Why I Don’t Totally Hate Inflation

Biden, Economy, Inflation / By / June 3, 2022

Inflation sucks. It makes everything more expensive. It punishes savers (think of your 401K) and rewards debt (like your mortgage or car payment.) Inflation strains budgets, hurts the economy, stresses people out, and generally reduces our standard of living. Yet, I can’t totally hate it. Why? Because the majority of people being punished by it right now deserve it. Yep, I said it.

For far too long, American voters have been pulling the lever because they want something for nothing. They don’t care who is getting screwed in order to bring them their government handouts, as long as it isn’t them. They don’t care if the government wastes and steals piles of money, as long as they aren’t footing the bill and they get some of the leftover scraps. Voters elect politicians who promise them copious amounts of largesse, while telling them someone else (bad) will pay for it all. Be it evil corporations, or the parasitic rich (always conveniently defined as someone with more money then them, regardless of income level.) But the truth is, all this lavish spending just adds to the national debt (kicking the can down the road for our children to pick up the tab.) Or gets “funded” by printing more money (i.e. inflation.)

And the voters buy into the lie. Or at least go along with the charade. Whether the reason we go along is stupidity, ignorance, or greed doesn’t matter. We let the government spend us into a hole that is going to require a lot of pain to get out of. And we should be the ones bearing that burden. Not some other bogeyman. And certainly not our children.

Inflation hits everybody the same. Even the poorest among us. In that way, it acts much like a regressive tax. So the suckers who voted for “free shit!” are finding out it wasn’t so free after all. The 40-year high inflation currently gripping the US has “President” Creepy Joe’s poll numbers in the toilet right now. Biden and his party are currently looking at a disemboweling come November. As the party of “free shit!”, it couldn’t happen to a more deserving bunch.

Yet, the wrath being directed at Creepy Joe and his socialist buddies for inflation is rather unfounded. Whether they realize it or not, the people who pulled the lever for them are getting exactly what they voted for.

I believe in justice. I believe people should get what is coming to them. Good or bad. That is why it is hard to hate the current wave of inflation hitting the nation.